MDHA approves land acquisition loan for MCC

Tuesday, July 14, 2009 at 11:11pm
15WEBmdhaRyan.jpg

MDHA's Phil Ryan

Moving another step forward in the Music City Center process, the Metropolitan Development and Housing Agency board on Tuesday voted unanimously to enter into a $64 million loan agreement to secure funds for land acquisition.

The agreement between the agency and First Tennessee Bank comes with a three percent minimum interest rate. According to MDHA Executive Director Phil Ryan, the loan is secured by the tax package created to fund the new convention center project as well as a lien on any property acquired by the agency with the money.

The loan is spread out over 12 months to eventually be paid for by the project’s bond financing, although there is a contingency provision in the deal in case Metro takes longer in working through the bond set up.

“Metro expects within the next 12 months they'll get the bond deal done and take this out,” Ryan said. “But if they don't do it in 12 months, they'll be another 12 month period on the $64 million loan or whatever the balance is.”

Ryan expects the loan to close within the next few weeks, after which MDHA will begin to purchase property from the current landowners.

The Music City Center is a planned $635 million convention center for downtown Nashville.

 

15 Comments on this post:

By: idgaf on 7/15/09 at 5:58

So much for the lie that taxpayer money wouldn't be involved.

We sign the note we own it.

By: nashbeck on 7/15/09 at 7:43

Glad to see this!

By: JeffF on 7/15/09 at 9:03

An actual admittance that they cannot get the bonds for the entire project yet! Oh whoa that they will have to tell all those already booked meetings that they will not have a building. This made my day.

They are feeling cornered. They have pre-passed as much as they could without actually committing to the project. Now they will have to man up and decide to try the general obligation bonds and face the spectre of public opinion at the ballot box or they will have to indefinitely shelve the project.

The revenue streams are falling far, far, far short of meeting the debt load AND the operating losses and the new convention center hotel would further eat into the stream since it will capture those taxes to pay its own debt. Suddenly meetings that were supposedly only coming because there was going to be a new building will come anyway to the existing paid-for building, further increasing the egg to face quotient. No one will buy pure revenue bonds for a project with those revenues not meeting the need.

Where going to have a vote or no center, win-win for everyone (except the businesses being moved to create the hole in downtown). Maybe the next mayor will not be so in-bed with the tourism folks and will elect to get the state provisions changed on this revenue and use it for something useful and actual government service oriented instead?

It would be nice if all these people would admit defeat before spending any more money on this nag, but I will take their silent desperation for now.

By: producer2 on 7/15/09 at 11:21

JeffF,
Good to see you still know how to dream... I for one have a hard time seeing where it says that this cannot be done. I do see where they say, and I quote.“Metro expects within the next 12 months they'll get the bond deal done and take this out,”
Like any good steward they are trying to get the best possible rates and the market is still not where they would like it to be. Unless you have some unique ability to see things others can't (which I know you think you do) then everything seems status quo to me. Property will be bought soon, Brand for anchor hotel will be released soon, early grading and prep work will begin soon, and your bubble will burst VERY soon.

By: JeffF on 7/15/09 at 11:39

Considering the financing plans were going to be done last fall, then December, then late winter, then Spring, then sometime this summer, the 12-month window is a large hurdle for them to admit to.

As an near expert let me tell you this; the market is no where near where they need it to be. The going rates are bad on even good investments capable of being repaid with pledged revenue streams. There is no such think as junk revenue bonds anymore. That market is not coming back for at least 5 or more years (if at all). Moodys will not rate a revenue bond and insurors will not underwrite a bond issue with revenues far trailing the debt obligation. That is the reason why this has finally been unofficially back burnered for ANOTHER year.

You will not see the hotel for a while either since they are depending on the same bond market and same revenue streams. That is the flaw of the private/public partnerships, there is very little "private" in the partnership, they are just tagging along for the guaranteed management money.

You better hope the congressional health plan does not pass with that wealth tax. Since that same group are the ones who invest in these schemes, not giving them an out with these tax-free investments will almost permanently kill the muni market.

Which is it, are they going to shelve the project for a year or more or are they going to GO this stinker? I personally am hoping they feel froggy and try jumping into the GO bonds. The referendum vote will permanently kill this project, no matter how much whining the poorest industry does. In many cases citizens have been known to attach other referendum items to these votes which prohibits their local government from entering into this shady industry. I am thinking the tourism people are not ballsy enough to find out what the citizens of Nashville really think of them and their billion dollar plans.

I would try harder to get the hotels in the area to post higher occupancy rates so they can collect more tax money. They are the ones letting you down. You should probably make it illegal to build teleconference facilites in Nashville (particularly the Marriott chains). I would also try to find away to have the small hotel/motel owners in the Davidson fringes as well as Gaylord come out in support of this downtown oriented plan. Their silence is deafening.

By: producer2 on 7/15/09 at 11:43

Only time will tell what kind of expert you truly are. I am betting not as much as you think...

By: JohnBirch on 7/15/09 at 11:44

Producer

Your insistence that we are just "waiting for the best rate" tells us all we needd to know about why this project is headed for fiscal, design and political disaster. Look at Dallas - they aren't waiting for the right rate. They are waiting for someone other than their taxpayers to guarantee it. They slap a city guarantee on it and they get a great rate. The world has changed and you need to change with it/

By: producer2 on 7/15/09 at 11:56

You can always dream...

By: producer2 on 7/15/09 at 11:57

meanwhile the project keeps moving forward...

By: JeffF on 7/15/09 at 12:25

Actually Dallas is waiting on a "great rate" as well. And waiting, wand waiting, wand waiting. There are hundreds of waiters all over the country, and most of them are waiting on money for essential and necessary projects. They will get first priority since they will usually be general obligation (many of them are school and stormwater projects). The frivolous projects like convention centers, consolidated airport rental car facilities, and publically financed and built hotels will be the final projects to receive debt rates attractive enough to start the bidding process.

Tennessee has a great set of laws that prevent the municipalities and their related OBEs from private placing of debt. This means auction each and every time for the large projects. So the going market rate has to be well below target in order to ensure an auction with "good" rates on the bonds. Doubly true considering the voluminous amount of risk on this particular revenue stream since it has never even come close to meeting the projections from the always wrong convention center and consultants.

I have already been warming up my petition signing hand and have laminated my voter registration card. The people in charge (the chamber of commerce and the cvb) and their toadies in the courthouse are quickly discovering that they are being cornered into the General Obligation Trail of Tears.

By: producer2 on 7/15/09 at 2:25

Dallas has been waiting for a month since they passed (by popular vote) their hotel referendum. If memory serves you said that the referendum would never pass, now are you banking (no pun intended) on them not being able to secure any bonds? What if they do, then what will be your next hurdle? Also you should get a better understanding of who is in charge, they are called Metro Government. Have you paid attention to the votes? Did you read the article today? Seems as if as stated, the project continues forward momentum. Instead of laminating your voter card you should be looking for your next excuse...

By: Dragon on 7/15/09 at 2:50

How much has been collected by the tourist tax that is set aside for this white elephant? How long will it take to pay off the loan to buy the property?

By: producer2 on 7/15/09 at 2:56

I think you will find all of that info online but I believe they are collecting about $30 million a year. There is already a pretty large surplus in the account to begin with.

By: JeffF on 7/15/09 at 7:09

Corrections:

Dallas voted May 6. Their board (choosing not to hide behind an OBE) approved the bond issue once market conditions allowed for their sell. Their own projections appear to show the market not improving for their own issue until next year at the earliest. They are mothballing the site for long term. The mayor (Leppert) admitted the likelihood of this event a few days before the vote (the one half of one percent mandate he was wanting).

BTW $30 million doesn't even cover the principal of the debt load. Throw in operating losses, employees benefits, and the hush money paid to Gaylord to keep them silent and you see where the smell is coming from. The hotel constuction, management fees. and operating losses plus the cost of the existing facility. Tisk, tisk, this all smell of GO.

By: producer2 on 7/15/09 at 9:20

The only true comment in all of your post above is the fact they voted (again a public referendum) on May 6th. I apologize I was off by three weeks. The rest of your rant is pure speculation at best and ridiculous accusations at worst. If this is all you have don't bother, people with half a brain see right through your nonsense. But then you have a tendency to underestimate the majority.